Lear­ning from Start-ups and Downs

To be a respected founder these days you need a little failure in your reper­toire. Arthur Tolsma liter­ally wrote the book on the subject and knows exactly what you can learn from start-up failure.

Arthur Tolsma

Arthur Tolsma co-founded Gree­tinq in 2007, where he expe­ri­enced the ups and downs of the start-up life. After winning a national TV show in 2009 he was seen as a successful entre­pre­neur in the media, but four months later was almost bankrupt and had to reor­ga­nize the company. He held on, and sold the company in 2012. He became successful in sharing his insights in inno­va­tion and entre­pre­neurship; as coach for high-tech start-ups, writing the book ‘Start-ups & Downs’, and as speaker in the Nether­lands and abroad.

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Failure ain’t what it used to be, my friends. From FuckUp Nights to Start-up Wakes, the tongue-in-cheek cult of cele­bra­ting failure has rapidly gained popular trac­tion and not only in the closed-off start-up world. This so-called “failure menta­lity” is being encou­raged across a host of indu­stries as a gateway to inno­va­tion. The theory behind this move­ment is that meaningful change requires trial and error, it requires thin­king differ­ently and it requires courage. To enable this, compa­nies need to make people feel like it’s okay to fail. Start-ups daily tread the thin line between success and failure and there­fore are faster to inno­vate and quicker to bounce back when things go wrong.

In prac­tise however, no matter how trendy it is, the reality of failing despite your best efforts is no walk in the park. Arthur Tolsma knows first-hand how diffi­cult this reality can be. In 2007, he decided to play the inno­va­tion game and by 2010, it was clear that he and his fellow foun­ders had lost. His company Gree­ting BV, a perso­na­lised voice­mail gree­ting service, had garnered a small, enthu­si­astic customer-base but unfor­tu­n­a­tely that was not enough to sustain the company in the long-term. They were forced to let eight people go and Tolsma lost the €100,000 he had perso­nally inve­sted. Against all the odds however, they managed to keep the company alive until 2012 when they sold it to a small telecoms company and so out of failure grew a small success. But when you put your heart and soul into a company that fails, the expe­ri­ence deeply affects you.

“After we failed it was very diffi­cult for me to share the story”, he says. “There wasn’t really a culture of sharing. Now, people are more open to that than a few years ago, and that’s very good. When I started sharing my story people were like “wow, that’s inte­re­sting!” and asked me to share lessons as well. That helped me to under­stand that it’s not only a failure story but it’s also about lessons learned, insights that are valu­able to share.”

He began to realise the power of these lessons when a rese­ar­cher at his alma mater “asked me to share my story with some entre­pre­neu­rial students and I said “who wants to listen to a failed entre­pre­neur?” As it turned out, a lot of people did! He was surprised at how excited the students were to hear about failure as it’s a harsh reality that many start-up foun­ders will even­tually face. Bolstered by these posi­tive reac­tions, Tolsma decided to write a book on the subject and even­tually produced the marvell­ously-titled Start-ups and Downs in January 2014. Now based in Utrecht, he has been sharing his story inter­na­tio­nally for years and it’s clear that there’s an appe­tite for honesty about failure. This hunger for authen­ti­city fits into a wider, growing trend that can be seen not only within compa­nies, but also across social media.

“Yeah, I think there are two things: that people realise the value of a failure story and react as part of a contra-move­ment to the Face­book and Insta­gram happi­ness. On social media there’s always a trend of showing only the good in your life, partly showing off but also partly being afraid to share fail­ures. People really value the real stories of people that fucked up because you don’t hear those stories often. They realise that there’s the same amount of lessons to be learned from failed people as from the successful ones.”

Follo­wing the success of the book, he now works as a free­lance inno­va­tion consul­tant where he coaches start-up and corpo­rate teams to be comfor­table with vulnera­bi­lity and failure as a means of helping them to find their best product-market stra­tegy. Toge­ther, they analyse the company’s customer needs, what the market trends are, how they fit in with the compe­ti­tion, and how to find their own USP. Start-ups of course are a lot more inno­va­tive than corpo­rates by nature, but Tolsma believes that there’s a lot that corpo­rate inno­va­tion teams can learn from their younger coun­ter­parts.

“Flexi­bi­lity is the biggest thing. Inno­va­tion teams are usually sear­ching for a busi­ness model and they need flexi­bi­lity. That’s diffi­cult for corpo­rates because they often have to align with the other busi­ness units, with manage­ment, or the board-level. That’s one of the main chal­lenges, to have that flexi­bi­lity, but some­times also the freedom to think broadly.”

By sharing his insights with corpo­rate inno­va­tion teams, Tolsma hopes to lessen their chances of making the same mistakes. That’s the funny thing about failure: people often repeat the same mistakes over and over so it’s easy to pick them out. Success on the other hand, is far harder to quan­tify. He believes that by allo­wing teams to be vulnerable to failure, they’re likely to discover their grea­test strength. But if a big company wants to encou­rage inno­va­tion, there needs to be an internal commit­ment.

“I do believe that there needs to be the will in the first place. If you don’t under­stand that inno­va­tion is a risky busi­ness, then you shouldn’t start. However, I do see a lot of corpo­rates in the Nether­lands focus on inno­va­tion and on working as a start-up because they see the start-ups that succe­eded in brin­ging inno­va­tion to the market. If you learn from those ways you create more support from the company, i.e. if we do it this way then we can take small steps and still reach a certain success point, without inve­sting too much money.”

Having spent so much time analy­sing his failure, Tolsma has had time to reflect on the things he did right, too. Looking back on his company, he allows that while he would do many things dierently, there’s also a lot that he wouldn’t change. “I’m really happy with the way we commu­ni­cated to the team and the inve­stors. I still have good rela­ti­onships with my co-foun­ders and the inve­stors from then. We are still in contact and so often, espe­ci­ally with a failure, people get angry, there are fights and they don’t speak to each other at all.” He has been a coach since the sale of the company, but as any serial entre­pre­neur will tell you, inno­va­tion becomes addic­tive. As time goes on, the temptation is growing to get back in the game himself.

“I’m just waiting for the right team and the right moment, the right idea, just whenever that comes toge­ther, but I think I’ll defi­ni­tely do a start-up once again.” When that day comes, no doubt the expe­ri­ence of running his own company and of working with hosts of diffe­rent inno­va­tion teams will have stood him in good stead. Over the years, he has become wise to all the poten­tial problems and pitfalls a start-up might face. “I think the most important one is that people say a good product sells itself. That’s bull­shit. I mean, a good product really helps but it’s not enough. You have to under­stand the market needs, you have to under­stand how people are paying, how the busi­ness model works, because we had a nice product but it was by far not good enough. With a very good product you can make some money, but with a bad market stra­tegy you can defi­ni­tely kill the product. I mean if you have a bad product it’s also very diffi­cult with a very good market stra­tegy to make it successful but a good product is by far not enough.”

And so Tolsma is holding out for a balance between the right product and the right product-market fit. The nature of the tech indu­stry though is that it changes rapidly, and what may have been true six months ago, may not still be true today. “Some­times, you think they must have thought of all or most things by now, but every time there’s some­thing new it’s a case of “Oh! Yeah! Of course, why not!? It’s so di£cult to predict but that’s good to know.

Corpo­rates too are getting smart about the rapidly chan­ging trends and reali­sing that they simply don’t have the agility to keep up the start-up pace. “At one of the banks where I did a project they are working in a start-up coope­ra­tion programme where they don’t incu­bate start-ups but they see that start-ups are inno­va­tive and that corpo­rates don’t have the crea­ti­vity to invent that. They want to work with them toge­ther to see if they can imple­ment new tech­no­logy in their company. And that’s also what I think is really valu­able if you look at the quali­ties of a start-up and the quali­ties of a corpo­rate, to combine those two.”

That colla­bo­ra­tion between large corpo­rates and smaller start-ups is a healthy way to fund inno­va­tion, to avoid stagna­tion and to allow both start-ups and corpo­rates to play to their strengths. The majo­rity of start-ups however, will operate outside of special cases like this. Foun­ders will continue to take leaps into the unknown as they attempt to find the next big tech. So, does he have any advice for foun­ders just star­ting out? “Watch your customer. Analyse your customer and not from your office! The customer always acts differ­ently to how you think. When you start a company, you have to start talking to custo­mers and analy­sing custo­mers and seeing how they react and how they work and learn from that so you have to learn these really valu­able lessons, too.”

In many ways, teaching corpo­rates how to be more like start-ups is a reversal of the usual order, where the begin­ners learn from the more expe­ri­enced. However, when it comes to tech, the new tends to win out over the long-estab­lished and by paying atten­tion to how start-ups succeed and fail, corpo­rates can take educated risks to help them stay at the cutting-edge. Arthur Tolsma learned the hard way, so you don’t have to.

Arthur Tolsma

Arthur Tolsma co-founded Gree­tinq in 2007, where he expe­ri­enced the ups and downs of the start-up life. After winning a national TV show in 2009 he was seen as a successful entre­pre­neur in the media, but four months later was almost bankrupt and had to reor­ga­nize the company. He held on, and sold the company in 2012. He became successful in sharing his insights in inno­va­tion and entre­pre­neurship; as coach for high-tech start-ups, writing the book ‘Start-ups & Downs’, and as speaker in the Nether­lands and abroad.